Marijuana theme is one to watch, says Ma-Weaver

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Jacob Ma-Weaver, founder and manager at Cable Car Capital, was interviewed in AlphaQ in 2017, and in what turned out to be a prophetic throwaway line, announced he was researching shorting companies seeking to profit from the legalisation of marijuana.

That industry has grown since then as has Ma-Weaver (pictured), who has now launched his own long/short fund, The Funicular Fund. Cable Car is managing about USD17 million in capital, having returned a net annualised 20 per cent since inception.

His interview, headlined ‘Legalising weed raises shorting potential’, sent AlphaQ’s Twitter feed into a frenzy with a 1500 per cent increase in hits, which just goes to show that, whether it’s profitable or not, interest in weed, marijuana or cannabis is huge.

“I am interested in cycles,” Ma-Weaver says. “Securities move together so that where there happen to be real companies that are doing exciting things, then unethical people follow along and promote financial schemes in the same area. It will be something else next year.”

Ma-Weaver is keen to clarify that he is not spending his day betting against what is a real emerging industry. “It’s just one particularly fruitful area for finding short ideas,” he says. “There is a real industry that is developing in Canada where they have legalised something that was a blackmarket product and some businesses are going to make a lot of money from that.”

However, he warns that most people looking at the sector would agree that the vast majority of companies in the sector have valuations that are hard to support.

“Even real companies with exciting prospects seem qualitatively high against the value they will generate but I don’t want to bet against them just on valuation.

“It’s hard to say what the value of an emerging industry is going to be and you can sketch out fundamental concerns such as the commoditisation of the product that might lead to lower pricing – but it’s a guessing game at this point as to who the winners and losers will be.

“There are cannabis-focused hedge funds even and I wish them well. There is likely to be value to their analysis but what I prefer to do is short fake companies.

“In any sector you have unethical people who look at whatever the flavour of the moment happens to be and they will start stock schemes or rebrand an existing shell company with a connection to what everyone is excited about.

“There are a handful of companies operating in other business areas that have all of a sudden seen fit to announce they are developing some sort of CBD beverage or other product. They are often engaging in other schemes to enrich themselves at the expense of shareholders and that makes it interesting to me.”

Ma-Weaver wouldn’t rule out being long in the marijuana sector but it’s just a theme within his portfolio at the moment.

“My approach is very much that of a generalist looking for mispriced individual securities, rather than a particular sector or country.”